Chinese, Indian businesses eyeing BD as ideal RMG investment location

Chinese and Indian manufacturers and exporters, mainly dealing in apparels, are eyeing Bangladesh as the most ideal destination for relocation of investment to cope up with the growing labour costs in their respective countries, industry sources said on Thursday. Manufacturers of apparels, footwear, toys etc., of the two emerging Asian economic powers still find Bangladesh as a viable, potential location for their operations, in spite of its problems of power shortage, political instability and other related problems, says a KPMG report. The U.K.-based KPMG is a global network of professional firms, providing audit, tax and advisory services to industrial and commercial clients. Labour costs have been rising in both China and India, which most recently announced duty -and quota-free imports of Bangladesh garment products to keep apparels affordable for most of their people, trade bodies said. Imports from Bangladesh will ease apparel prices at least by 20 per cent, a recent report of the New Delhi-based Confederation of Indian Textile Industry (CITI) said. The Indian government's decision in early September to allow duty-free access to 46 apparel products from Bangladesh could also hasten the migration of the Indian apparel industry, from Chennai, Mumbai and Hariyana, traders said. The government in Beijing is also encouraging low value-added and highly-polluting companies to move out of the heavily industrialized Pearl Delta region, freeing up increasingly expensive land for more sophisticated businesses, KPMG said. China and India are the two greatest trade partners of Bangladesh, dealing annual business worth of over $4.5 billion and $3.5 billion respectively. "Several firms from India and China, mainly from garment sector have initiated preliminary works to set up relevant industry in Bangladesh, and it is expected that they will register their initiatives if they find proposed investment viable," Tauhidur Rahman, a director, of Board of Investment (BoI) told the FE. India so far invested nearly $600 million in Bangladesh, in different sectors including ready-made garments (RMG), he said. "If we could provide better infrastructure for quicker movement of goods, uninterrupted power for mass production, and other logistic supports, large investment from, China, India and even South Korea could be possible," Prof. Mustafizur Rahmna, executive director of the Centre for Policy Dialogue (CPD) told the FE. "Only cheap labour cost may attract some smaller firms with small fund, and not large foreign direct investment (FDI)," the head of the think-tank - CPD, said. However, the Indian firms might choose Bangladesh for more investment in garment sector to reap the fruit of duty and quota free access to India and the European markets, Prof. Rahman added. For lack of required facilities, the annual flow of foreign direct investment (FDI) to Bangladesh is still less than a billion dollar as compared with $188 billion in China and $25 billion in India, Prof. Rahman said. Indian garment exporters, facing rising costs and declining sales, are likely to shift factories to Bangladesh, in spite of poor infrastructure, lax security, frequent power outage to benefit from wages that are one-third of that, it India, traders said. "The overall manufacturing costs in Bangladesh are 60 per cent of those in India," said a data of the CITI. "Over the past decade, apparel-makers in India-and now even China, the world's top garment exporter-have been steadily losing share in this labour-intensive business to Bangladesh," the Indian trade group said. Bangladesh garment factories pay a minimum wage of some Taka 3,500 per month to each worker, officials of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said. There are more than 5,000 garment factories in Bangladesh, employing some 3.5 million workers, mainly women, the BGMEA said. The average wage of garment workers is $200 a month in India and $150 in China, CITI said. "With a 4.5% share in world garment exports, Bangladesh has overtaken India, which has a 3.5% share," said CITI. Bangladesh garment exports constitutes more than 75 per cent of the country's some $23 billion annual exports, the BGMEA said. Abdus Salam Morshedy, president of Bangladesh Exporters Association said: "Indian investment in textiles, IT, jute spinning, jewellery and service sectors are most welcome." He however said the garment sector had been saturated and it was running 20 per cent short of the required labour force. "India should invest in sectors in which we are weak," Morshedy, a former president of the BGMEA, said.